‘What’s there to celebrate?’ ask McDonald’s rivals on its 20th anniversary

Are we still lovin' it? McDonald’s faces tough times and some hard questions in the year the fast food giant completes 20 years in IndiaRavi Balakrishnan&Rajiv Singh | ETBrandEquity | November 09, 2016, 08:00 IST

When McDonald’s started 20 years ago in Mumbai, it was welcomed with crowds queuing up outside its restaurants. When its South Mumbai location replaced an iconic Irani café, doomsayers predicted a culinary apocalypse, where McDonald’s would subsume local eateries and we’d get our fix of parathas, dosas and idlis from an American burger company.

Two decades later, traditional Indian fare and the restaurants that serve it up have proved to be surprisingly resilient. After a long run as the only burger show in town, McDonald’s in India is contending with global arch-rivals like Burger King, specialty chains like Carls Jr and every tony diner serving up its own bespoke burger range. More critically, it has a formidable rival in Domino’s Pizza which has stolen a lead in terms of outlets, revenue and marketshare. To make matters worse, a revitalised KFC is snapping at its heels. (See Food For Thought)

McDonald’s is currently preparing to launch its 20th anniversary campaign around the theme ‘A Lot Has Changed. Nothing Has Changed. 20 Years of Lovin It’. It tracks the twenty year journey of a couple who meet at, bond over, and finally bring their child to McDonald’s, and an interactive component inviting people to send their photos taken over the last two decades during visits to the burger chain. But the question many of its rivals and industry observers are asking is if there’s enough cause or reason to celebrate.

There is, if you ask Amit Jatia, vice chairman, Westlife Development Limited and the owner of the McDonald’s franchise for the West and the South. He says, “Often brands from 10 years ago don’t do well today, since consumers move ahead. But McDonald’s is unrecognisable from what it was four years ago. The restaurant is more relevant to consumers of today. Many mall owners tell me it doesn’t don’t feel like a food offering is complete without McDonald’s.” Kedar Teny, director- marketing and digital, McDonald’s India (West & South) adds, “We are looking to double the footprint from 240 to 500 in the West and South by 2022. We have a significant outlay of Rs700 to Rs800 crores to invest and grow this market.”

If the North and East are absent in these growth plans it’s because of McDonald’s prolonged legal battle with its franchisee for these regions, Vikram Bakshi, ongoing since 2013. Commenting on the development, Jatia will only say, “The last couple of years have been difficult, but in the long term, a country takes time to build. We have years ahead of us. The difficulty will be overcome soon as litigation gets resolved.”

However the legal problems have resulted in stagnant growth in the North, one of the largest regions in the country, at a critical time when the competition has upped the ante. For his part, Bakshi commenting to Brand Equity in an unofficial capacity has this to say: “Time to reflect! Being replaced from a ‘numero uno’ position since 2013 and to consistently lose market since 2013 cannot in any way be a time to celebrate. Wonder what the brand owners are thinking? Numbers don’t lie!”

While most industry observers credit McDonald’s with having built a food habit that didn’t previously exist in the country, even its most charitable supporter admits the road ahead is likely to be a lot harder. Being two decades old means the brand has lost some of the sheen and novelty it once had and also that the fight for every piece of real estate is against several deep-pocketed competitors. There’s also a feeling that McDonald’s, in many ways a canny marketer which mastered localisation, had a few slip-ups.The first of these is the delivery business — the lynchpin of Domino’s business model and a favourite option for a vast number of hungry Indians. Due to its ubiquity in most markets by dint of sheer number of outlets, delivery was never a priority for McDonald’s, globally. McDonald’s offered delivery in India and is now present on platforms like Food Panda. According to Teny, it is seeing double digit growth. But its not perceived to be a strength of the brand. Domino’s, on the other hand, which began on a strong delivery platform has expanded its appeal over the years. According to Murugan Narayanaswamy, senior vice president - marketing, Domino’s Pizza India, “Both functionally and emotionally Domino’s as a brand has clicked with consumers. People don’t just come to us for escape food; it’s comfort food that can be shared with all at home and outside.” Pointing to its slew of innovations over the last couple of years like Taco Mexicana and BurgerPizza for instance, he adds, “If any brand can actually party for being present in India over last two decades and grow despite all odds, it’s Domino’s.”McDonald’s pricing strategy has industry observers puzzled. It started life, perhaps unwittingly, as a premium food offering in India: its glass fronted, air conditioned outlets, with clean loos all adding up to an ambience many of its consumers were unfamiliar with. Through the 2000s, it made a big push towards becoming more affordable, driven by its memorable ‘Aap ke Zamane Mein Baap Ke Zamane Ke Daam’ campaign with prices as low as Rs20. It perhaps went too far chasing affordability says Ashita Aggarwal, head of marketing at SP Jain Institute of Management & Research, who believes the tag has proved to be the brand’s undoing “It’s no longer perceived as an aspirational place. College goers, who are variety seeking and want to experiment, and kids have become the consumption drivers over the last few years. This led to dilution of brand equity. The fate of Tata Nano — the cheapest car which people don’t wish to buy because of the ‘cheap’ tag — is shared by McDonald’s.”

The third big challenge ahead of the brand is consumer concerns about health and wellness. Future Group’s group president, Food, FMCG Devendra Chalwa believes, “America had 30 to 40 years to grow the market before this happened. But in India, the brands are not as big yet, but that knowledge is already here and the party won’t last.”

There are of course several as yet untapped areas for the brand. Management consultant Ambi Parameswaran believes it could get a lot more innovative when it comes to formats: “A kiosk where people can buy and walk and where you get guaranteed quality and taste at a price; the ATMisation of McDonald’s is a huge opportunity. It can have just three products: burgers, Coke and fries and can compete with street food. Obviously at twice the price, but people will pay because of the reputation of the brand.”

After 20 years, McDonald’s is a hard to ignore presence — not as ubiquitous as it is in the West — and certainly years away from dealing a body blow to local favourites. Instead, with its best products like McAloo Tikki, it’s added to the vast culinary melting pot of Indian cuisine. And yet the undeniable headwinds and challenges make us ask: 20 years down the line, will we be still lovin it?